Consumer behavior is a field of study in economics which tries to explain consumer choices and their decisions in the context of limited income and the perceived benefit they derive from various goods and services.
The perceived benefit obtained from a product or service is called utility in economics. Marginal utility is the additional utility from each additional unit purchased.
Theories on consumer behavior state that people’s income is limited and their want are virtually unlimited which means they are foced to make choose some things and let go others. So they spend it carefully to best satisfy their needs and desires. Of course, their choices may not be perfect, but they are far from haphazard.
The marginal utility theory states that the ratio of marginal utility to price is same for all the products that have been purchased by a consumer. This may happen consciously or subconsciously and the degree of effort by a consumer to make the best decisions will increase with the importance and value of the product being purchased.
Study of consumer behavior also includes demand which is the quantity of a product demanded at various prices. While the most important factor in determining demand of a product is its price, other factors such as the income and tastes etc. will also affect the quantity demanded by a consumer.
Consumer choices and decisions are significantly affected by the information available to them. A consumer with better knowledge will get more value for money than someone with less or poor-quality information.
Another determinant of consumer behavior is their personality and the impact of society. Social factors have a significant effect on consumer choices.